Individuals in Illinois who are older than 50 and get a divorce are a part of a trend that has seen the divorce rate for older couples double since the 1990s. One of the main issues that has to be addressed during a divorce is the division of financial assets, including retirement. Both parties should be aware of how to properly divide their retirement assets in order to avoid having to pay high tax penalties or suffering a financial loss.
Individuals who have pensions or 401(k) plans should obtain a qualified domestic relations order to divide the funds. A QDRO is a legal document that details a divorcing spouse’s right to obtain a portion or all of the funds in the account holder’s qualified plan. After the QDRO is given to the administrator of the plan, the specified portion of the plan can be transferred to the divorcing spouse.
In order to determine how or whether employer pensions can be divided, it is important to contact the employer. Individuals are recommended to hire a professional who can determine the value of the employer pension. Until that information is available, which can take up to three months to obtain, no terms should be established for dividing the pension.
While QDROs are not required for IRAs, the division of the accounts does have to be specified in a separation agreement or divorce decree. The IRA custodian then has to receive the agreement in order for the funds to be divided.
A family law attorney may assist clients with obtaining favorable divorce settlement terms regarding the division of certain assets, including retirement assets. The attorney may file the necessary legal documents to ensure that certain retirement assets are properly divided.